Boston, MA -- (ReleaseWire) -- 12/26/2012 -- Indian IT spending is expected to reach US$20.5bn in 2012, up 14%, with government IT procurements at state and federal level helping to generate spending. Following relatively modest PC market growth in Q112, owing largely to exogenous factors, BMI expects slower growth in 2012, with IT Services in the vanguard. However, India's potentially vast IT market appears set to remain one of the region's growth opportunities owing to a growing economy and healthy consumer sentiment. Realisation of the market's long-term potential depends on raising India's low computer penetration and the government's ambitions to connect the vast rural areas to the outside world. The next layer of tier-3 and tier-4 towns, beyond the top 75 cities in India, is expected to be the major growth driver for the next few years, due to rising PC penetration.
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Headline Expenditure Projections
Computer Hardware Sales: US$8.8bn in 2011 to US$9.7bn in 2012, +10.0% in US dollar terms. Forecast in US dollar terms upwardly revised due to analyst modification despite slower growth in Q112 as consumer demand was constrained by macroeconomic factors.
Software Sales: US$2.2bn in 2011 to US$2.5bn in 2012, +15% in US dollar terms. Forecast in US dollar terms unchanged but enterprise resource planning (ERP) spending will continue to trend upwards, with stronger demand for technology from the small and medium-sized enterprise (SME) segment.
IT Services Sales: US$7.1bn in 2011 to US$8.2bn in 2012, +18.0% in US dollar terms. Forecast in US dollar terms downwardly revised due to analyst modification and macroeconomic factors, but a number of large projects are expected from the government and from other key verticals.
Risk/Reward Ratings: India's score is 42.1 out of 100.0, unchanged from the previous quarter. India still ranks ninth in our latest Asia RRR table, ahead of Thailand and Vietnam but behind China. The country achieved a relatively high IT Market score of 52.5, reflecting the potential returns, but its overall rating was lowered by a Country Structure score of just 15, the joint-second lowest in the region.
Key Trends & Developments.
- In 2012 there are expected to be strong growth opportunities in the next 200-400 smaller cities in India, where vendors are expanding their retail and distribution presence. Around 45% of new PCs sold in the Indian market are now shipping outside the top 75 cities. The government's policy of providing tax breaks and subsidies for hardware manufacturers should help keep prices down and support growth.
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